Environmental Due Diligence: An Essential Step in M&A Transactions

Troutman Sanders LLP
Andrew J. Perel and M. Buck Dixon

September 1, 2019

This publication was originally published in the Troutman Sanders Law Blog

The risk of shortcutting environmental due diligence cannot be overstated. There is a tendency during mergers and acquisitions (M&A) transactions to view such due diligence as simply another box to check before closing. It is not. What might appear to be a time-consuming, costly and burdensome process, will not be fully appreciated until businesses are faced with the consequences of not doing so. 

This overview highlights several important benefits of proper environmental due diligence, discusses risk allocation and mitigation strategies, and identifies emerging issues.

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EPA Issues New CERCLA Guidance on Liability Protections for Current/Potential Impacted Site Owners

Cozen O’Connor
Amorie Hummel and Marcia Mulkey

September 10, 2019

If you’re back to work navigating the complexities of cleaning up a brownfields site, you’re in luck. The United States Environmental Protection Agency (EPA) issued a 31-page update to “Enforcement Discretion Guidance” for enforcement personnel as it relates to liability protections under the 2002 Brownfields Amendments to the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA) this summer. While styled as a memorandum to agency enforcers, this guidance and its predecessor documents are also offered by EPA as “general information to landowners, developers, lenders, investors, or other third-party stakeholders who may wish to become involved with impacted properties.” The guidance is available here.

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Could Your Property Be Contaminated? And Do You Want to Know?

Davis Wright Tremaine LLP
Lynn T. Manolopoulos

September 1, 2019

Avoiding Information Gathering About Your Property’s Potential Environmental Contamination May Not Do Your Business Any Favors

Do you own a piece of property that may be contaminated? We often hear clients say they do not want to know the answer to that question because they will be forced to do something about it. We disagree with that approach because you can’t make a good business decision about your property unless you have all the facts.

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The 2015 WOTUS Rule Is Repealed

Breazeale Sachse & Wilson LLP
John B. King

September 13, 2019

The EPA and the Corps of Engineers have taken the first of two steps to repeal and replace the definition of ‘waters of the United States’ promulgated by the Obama Administration in 2015 (the 2015 Rule). The definition establishes the jurisdictional reach of the EPA and Corps under the Clean Water Act to regulate navigable waterways, tributaries, and their adjacent wetlands. The 2015 Rule had been widely criticized as being overly expansive because more waterways, tributaries, and wetlands were considered to be subject to jurisdiction.

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DOJ Announces Another Nail in Supplemental Environmental Projects’ Coffin

Vinson & Elkins LLP
Ronald J. Tenpas, Carrick Brooke-Davidson and Conrad Bolston

September 3, 2019

The Department of Justice (“DOJ”) will no longer use Supplemental Environmental Projects (“SEPs”) in settlements with states and municipalities as a result of a policy change announced August 21, 2019.1 The change follows a series of steps taken since 2017 curtailing SEPs. It may foreshadow future action to formally curtail SEPs in settlements with private sector parties, as the memo notes that the Department is actively reconsidering current guidance that continues to allow SEPs in settlements with private parties.2 Even without a formal change to private party settlements, companies should expect increased difficulty in incorporating SEPs in negotiated settlements and, if engaged currently in negotiations, should consider accelerating those negotiations if inclusion of a SEP is a critical priority.

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The Devil is in the Details (or Lack Thereof): A Costly Lesson in Allocating Environmental Responsibility in Contracts

Riker Danzig Scherer Hyland & Perretti LLP
Jaan M. Haus

August 7, 2019

 Reprinted with permission.  © 2019 Riker Danzig Scherer Hyland & Perretti LLP

A seller of a car wash property located in North Bergen, New Jersey recently learned the hard way that its failure to understand the nature and magnitude of contamination found on its property, and to clearly define in a contract of sale the scope of its obligations associated therewith, can be quite costly. In June, the Appellate Division of the New Jersey Superior Court upheld a trial court’s order directing the seller to fully remediate previously undiscovered environmental contamination at the property in accordance with its contractual obligations, which according to seller, was more than it had bargained for. Hector v. Super Car Wash LLC, et al., Docket No. A-3131-17T1 (N.J. App. Div. Jun. 10, 2019).

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States Ratcheting Down on PFAS Compounds, Moving Ahead of Federal Government

Cozen O’Connor
Peter J. Fontaine, Marcia Mulkey

July 31, 2019

New Hampshire has just become the first state to finalize drinking water maximum contaminant levels (MCLs) for PFOS and PFOA, two of the best known and studied PFAS (per- and poly-fluoroalkyl substances), setting levels for those compounds at 15 ppt (parts per trillion) and 12 ppt respectively, effective October 1, 2019. New Hampshire also adopted MCLs for PFHxS at 18 ppt and PFNA at 11 ppt. These actions, which were expeditiously moved through the New Hampshire decision-making processes, now predate final action on New Jersey’s proposed MCLs of 13 ppt for PFOS and 14 ppt for PFOA. New Jersey also already has the first formal PFAS MCL, for PFNA at 14 ppt.

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Importance Of Environmental Site Assessment Ever Expanding

McLane Middleton
Michael J. Quinn

August 8, 2019

This article originally ran in the Portsmouth Herald/Seacoast Online

The protection from environmental liability afforded by the Phase 1 Environmental Site Assessment (“ESA”) is well-known to purchasers of land who conduct ESAs before becoming the “owner.” These ESA derived protections now have expanded to cover tenants that were previously at risk.

First, some background. Although the public tends to think of the Superfund statute in connection with the worst hazardous waste sites (remember Love Canal?), it can apply to almost any property where hazardous waste requires remediation. Without causing the contamination, a new owner, a local government, a tenant or a charitable organization could each find themselves ensnared in the law’s strict liability framework by virtue of acquiring property or leasing property with preexisting pollution.

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EPA Proposes Sweeping Changes to Clean Water Act Section 401 Water Quality Regulations

Troutman Sanders LLP
Chuck Sensiba, Elizabeth J. McCormick and Morgan M. Gerard

August 13, 2019

On Friday, August 9, the Environmental Protection Agency (“EPA”) unveiled a pre-publication version of a notice of proposed rulemaking (“NOPR”) to clarify state water quality certification (“certification”) procedures under Section 401 of the Clean Water Act (“CWA”) to allow for increased regulatory certainty in federal licensing and permitting activities, and particularly authorization of infrastructure projects. EPA Administrator Andrew Wheeler announced on Friday that the “proposal is intended to help ensure that states adhere to the statutory language and intent of Clean Water Act.” The NOPR proposes substantive changes to the scope of state water quality certification authority under the CWA and the procedures governing these certifications, focusing on the plain language of the statute and at times departing from prior case law precedent.

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Death, Taxes and CERCLA

Taft Stettinius & Hollister LLP
Vivek R. Hadley

July 9, 2019

Benjamin Franklin famously said that nothing in this world is certain, except death and taxes. A recent decision from the Southern District of Ohio ruled that in some circumstances, not even death can save a party from CERCLA liability.

In Garrett Day, LLC v. International Paper Co., No. 3:15-CV-36, 2019 WL 1331680 (S.D. Ohio Mar. 25, 2019), several parties fought over who should pay for the expensive cleanup of a former paper mill that operated for 100 years in Dayton, Ohio. The Site contained several hazardous substances like asbestos, trichloroethylene, polycyclic aromatic hydrocarbons and polychlorinated biphenyls. The current owner of the Site brought a CERCLA claim and a similar state law claim against former owners and operators who may have contributed to the contamination.

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